I know that almost all of you have probably seen this ad …
“Texas Company Tapping $2.8 Trillion Oil Reserve… Under the Eiffel Tower
“Tiny company from Dallas preparing to extract 40 billion barrels of crude oil from beneath Paris, France…
“Discovery big enough to fuel U.S. demand for 5.2 years, according to Energy Information Administration…
“Estimates show 4,620% gains for investors who get in now… before this oil comes to market…”
Now that’s a good teaser, eh? I can just picture Gustave Eiffel’s engineering masterpiece as an oil derrick, spouting crude in a massive burst over the tour boats on the Seine. Good stuff.
And of course, many of you know who this company is already, since I mentioned it in the email about a week ago (that’s a lesson to all of you — sign up for the free Daily Update email if you want all the info!) … but I didn’t go into any detail, or confirm the guess, so let’s get into it.
The ad is for the Money Map Report, one of many confusingly-named letters in the great Agora universe, and the letter’s from publisher Mike Ward. He’d like you to sign up for your $50 subscription to learn about this Paris oil driller … feel free to subscribe, if you like, but if you just want the basic info, read on …
Here’s what they say about the discovery, and how it was made:
“The Forgotten Treasure beneath the City of Lights
“Known as the Paris Basin, this layered formation juts thousands of feet into the earth. It forms an oblong bowl 310 miles long and 186 miles wide.
“At the basin’s surface you’ll find vineyards producing the finest wines in the world, along with gourmet cheeses and other natural wonders. (Dom Perignon Champagne comes from a small town resting atop the basin.)
“But beneath that gilded soil – with the Eiffel Tower near its epicenter – the geological team from Texas discovered huge crude oil deposits….
“Their estimates showed 30 million barrels, at least. But they needed more time, and money, to complete their surveys.
“When a Small Company Risks Everything and Wins
“So the company (we’ll call it the “Tiny Texan”) decided to take an enormous risk.
It sold off its U.S.-based operations. Every oilfield, well and piece of equipment went up for sale.
“Then they took the millions in proceeds and poured them into the Paris project.
“Shortly after doing so, the company confirmed the first 30 million barrels. (Just as quickly, it purchased the rights to that discovery from the French Oil Ministry.)
“But what nobody knew at the time was just how big the discovery would become.
“The geologists hadn’t actually confirmed the physical limits of the accumulation.
“Discovery Grows from $5.04 Billion… to $2.8 Trillion
“So the company decided not to bring the oil to market – yet. The geologists continued surveying.”
So that part, at least, is certainly real — the Paris Basin has been producing oil for a long time, and for a while back in the early 1980s they even had a bit of an oil boom, with Parisians surprised to see the seismic data collection trucks in downtown Paris. But the oil, though it’s still being produced from some substantial fields in the basin, wasn’t easy enough to extract, or the reservoirs not as dramatic as had been hoped, and a lot of the oil exploration tailed off for 20 years or so.
And there is apparently some urgency to this story …
“In November 2009, the Tiny Texan will switch on Oil Well #1, on the outskirts of Paris, tapping into the first 30 million barrels.
“This historic event would be enough to triple the company’s oil inventory. And it’ll certainly be enough to jolt the bottom line, and launch this story into the mainstream investing media.
“The importance of getting in before the big event cannot be overstated.
“But this is merely the beginning.
“The Tiny Texan has an additional seven wells coming online right afterwards. They’re located to the south of the city, too.
“Combined, the first eight wells will tap into 66 million to 72 million barrels worth about $4.6 billion. That’s enough to drive the company’s market cap up 4,620% from current levels around $100 million.”
In case we needed more clues, we learn a little bit about the institutional investors who are putting money into the firm:
“Goldman Sachs just bought 1.07 million shares for its house accounts.
“Barclays bought 1.04 million shares with its own money.
“Palo Alto investors bought nearly 2 million shares.”
So what are we dealing with here?
This company is Toreador Resources (TRGL)
And I was hoping that if I waited a few days to write to you about it, the initial enthusiasm over these shares would die down a bit, but they’re still holding pretty firm at just under $8 a share, a good 50% jump from the $5 or so that the shares traded at before this ad began running last week (they did have a market cap of roughly $100 million, now it’s about $160 million).
I’d still imagine that, unless we see oil spike higher or some early and unexpected news from Toreador, that the price seems very likely to come down a bit — big spikes like that from newsletter attention don’t usually last that long. I could be wrong, of course, but I’d be surprised if we didn’t see the shares tail off a bit in the coming weeks if the marketing push slows down.
Toreador does hold some other interests in Europe, in both Hungary and Turkey, but they seem to be very focused on the potential of the Paris Basin projects and they’re trying to sell off their other holdings to focus their energy.
The company was indeed a Texas firm, focused on oil royalties, until they bought Madison Oil and Pogo Hungary several years ago and decided to build up their European concessions and production. More recently, this year, they announced efforts to focus more specifically on their Paris Basin oil shale projects, smelling the potential for transformative production there.
So yes, as the ad implies, this is a “Tiny Texas Company” that’s using the horizontal drilling and fracturing technologies that have been so successfully applied in the Williston Basin/Bakken oil fields to try to dramatically increase oil production in the Paris Basin.
Now, I can’t tell you whether or not they’ll be successful — they are planning to start drilling the La Garenne well later this year, which is aimed at a resource that they estimate could be up to 30 million barrels, but do take some caution from the fact that this is still being called, by the management, the “proof of concept” phase for the unconventional production in the Paris Basin — getting from that first potential 30 million barrel well (they estimate it as somewhere between 8 million and 30 million, actually) to exploiting a potential 40 billion or 65 billion barrel resource (the numbers depend on who you ask) is a long and difficult journey.
They seem quite confident, but of course they would be … so you never know. Their recent operational update is available here. It seems quite likely that successful drilling at La Garenne would enable them to upgrade their reserves numbers pretty significantly, but that’s just a guess and it’s going to take a lot of drilling to build up the kind of potential reserves (let alone production) that this ad teases.
Toreador is still in a period of transition, trying to “monetize” their Hungarian and Turkish operations and cut costs elsewhere to invest in Paris, and there isn’t really any analyst coverage (they’d probably be mostly guessing, anyway), but you can at least see their latest financial results here, and you can listen to their last conference call here.
Note that the company did ride a serious rollercoaster over the past five years — it may not have any meaning for the current company focus, but they rode their European production and discoveries to a $30 share price in 2006, and watched the shares collapse in 2007 and 2008 even as oil rose to new heights. The shares were in the dumps when the reorganization was announced early this year, so it’s probably worth cautioning that there’s likely to be a lot of investor sentiment riding on the success (one hopes) of this one well in the Paris Basin.
So what do you think? Can this Toreador profit from the oil bull? Does it seem more appropriate that they’re called Toreador Resources when you realize that the Eiffel Tower was originally proposed for Barcelona, not Paris? Do you think we’ll see another Bakken-like oil shale craze in the Paris Basin? Let us know your thoughts with a comment below.
And if you’ve ever subscribed to the Money Map Report, please click here to review it for us and let us know what you thought. Thanks!
Personal Capital is an advertiser with Stock Gumshoe, but Travis also uses it every day for his personal accounts and finds it invaluable. Here's what he said: "They offer a great (and genuinely FREE) 'second opinion' for your financial plan, but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.